Insights Pricing Dashboards: Understand cannabis pricing trends

Who can benefit from these pricing dashboards?

Headset is proud to announce two new Insights Premium Pricing Dashboards.

The price of any product is integral to a customer’s decision to buy or not buy, whether that customer is in a grocery store, a car dealership, or a cannabis dispensary. The new Pricing Overview and Pricing Details dashboards will allow Insights Premium subscribers to quickly and efficiently understand pricing trends within the cannabis industry and learn how those trends are impacting sales.  When used in conjunction, the dashboards allow subscribers to begin with an executive-level overview of the cannabis market, and then drill into extremely specific corners of the pricing landscape.

Members at all levels of the cannabis industry, or those looking to join it, will find massive value from the new pricing dashboards. Cannabis retailers can use these dashboards to ensure they are pricing their products correctly and to verify that they are carrying the right types of products. For example, a retailer could use these dashboards to learn that they should add premium chocolates and value tinctures to their current product assortment.

Producers can access these dashboards to ensure they are pricing their products correctly, determine if they should create new products, and also refine their competitor set.  These dashboards can help to identify brands that they already (or hope to eventually) compete with and determine how pricing affects their market shares.

Investors could also use these dashboards to determine how the cannabis marketplace is changing.  In particular, if we find that prices are falling this could mean there is more competitive pressure on brands and could result in a more difficult market.  

To demonstrate the value of these dashboards, we ran an example analysis of the Edible category in Washington. All graphs below are taken directly from the Pricing Overview and Pricing Details Dashboards. If you want to learn more about how Insights Premium can help you make data-driven business decisions, sign up for a demo.

Edible average item price and average EQ price

Let’s begin our analysis by looking at the two most important metrics in regards to pricing: Average Item Price and Average EQ Price. Average Item Price is the average cost of a unit purchased by the consumer after discounts and before consumer paid taxes. So, in Washington this is before the consumer-payed excise and sales taxes. In the Edible category, Average EQ Price is the average price per milligram of THC in the product.

On this first graph, we can see that over the last two years Average Item Price for Edibles in Washington has increased by almost 10%, from $13.10 in January 2019 to $14.37 in September 2020. However, Average EQ Price has had an equally steady decline from $0.18 per mg THC in January 2019 to $0.16 in September 2020, a decrease of more than 11%.

The next graph in the Pricing Overview dashboard has more details and can tell us how this can be the case.

Edible unit volume by package size

Average Item Price is a much more useful metric when we include the context of package size. Larger packages of cannabis products will almost certainly have higher prices than smaller packages. Therefore, pricing trends can be further clarified by understanding the package size sales trends within a category. This is especially true within the Edible category in Washington where there has been a significant shift in the unit volume to the primary package sizes over the last two years.

An interesting point here is that 100mg Edibles (the highest legal potency) have increased their proportional share within the category by 23.2% since January 2019, having grown from 69% of units to 85% of units. Often referred to as ‘Single Serves’, 10mg Edibles have decreased in unit volume share by 52.6%! Single Serve Edibles dropped from 19% of unit volume in January 2019 to only 9% in September 2020.

Edible unit volume by price band over time

Average prices provide only part of the picture. We next look to the distribution of unit volume across price bands to better understand market prices. You can see an average item price of $10, but the product prices can be distributed in very different ways. For example, a market with one product priced at $1 and another product priced at $19 would have an average item price of $10. In contrast, a market with one product priced at $9.50 and another product priced at $10.50 would also have an average item price of $10. These two markets, despite having the same average item price, are actually very different. Because of these differences, the best way to understand the pricing in a market is to examine the distribution of products in that market.

In the graph above we can see that the proportion of Edibles in Washington priced between $10 and $15 has significantly increased since the beginning of 2019, rising from 24% of units in January 2019 to 35% of units in September 2020. The opposite has occurred in the

It is also notable that the unit share of the higher price bands ($15-$20 and $20-$25) have held quite steady since the beginning of 2019. This indicates that there continues to be a set of customers looking for edibles in these price ranges.

Since the 100mg package size is clearly an incredibly important part of the Washington Edible market, let’s dive into it in more detail on the Pricing Details dashboard in the next graph.

100mg edible average item price by segment

The Pricing Detail dashboard allows us to carefully choose exactly what data we’d like to see with a wide selection of filters. For our continued pricing analysis of the Washington Edible market, we’ve chosen to filter the results to only show sales of the 100mg THC package size. We’ve also chosen to ‘slice’ or group the results by Segment, but there are other options for the Slice Data By filter such as ‘Brand’ and ‘Package Size’. Here we can see the Average Item Price by month for 100mg Edibles within the category’s top five best selling segments.

The Candy, Lozenge, and Gum segment immediately stands out with a significantly lower Average Item Price than the other four segments over the entire time frame. In August 2020, for example, the average price of 100mg candies at $12.85 was 14.4% lower than the average price for Gummies, the next cheapest segment. The next graph provides a more detailed view to understanding pricing of Edibles.  

100mg edible pricing landscape by segment

In this Pricing Landscape chart, we are able to see what percentage of total 100mg Edibles belong to each corresponding segment and price band bucket. The darker the green, the higher the proportion of total unit volume for that bucket. We’ve highlighted a few notable trends in red.

First, the Candy, Lozenge, and Gum segment has the highest total unit volume of all edible segments in both the $10-$15 and the $5-$10 price buckets. This means that candies are the dominant choice for 100mg Edibles under $15 by a fairly significant margin.

Secondly, the Caramels, Chews, and Taffy segment in the $15-$20 price bucket contribute more unit volume than any other bucket in this landscape. It is also notable how weakly distributed this segment is across the price buckets. This tells us that the market may have centered around this narrow range as the optimal price band for 100mg edibles of this type. However, this data is for all sales from the beginning of 2019 through August 2020. Next let’s look at how these segments are growing and at what price bands are growing the fastest.

Unit volume (last 90 days) and growth over last year

Bubble charts can convey a large amount of information, but they can take some effort to fully understand. We’ve filtered the results to show sales of 100mg Edibles in only the top 5 best selling segments, which you can see listed on the vertical axis on the left. Each bubble represents 100mg edibles sold within the corresponding segment (indicated by its vertical position) and it’s price bucket (indicated by its color). The size of the bubble indicates the total unit volume to that product group over the previous 90 days and the horizontal position of the bubble indicates the growth over the same time period one year ago.

With that context we can see that over the previous 90 days Caramels, Chews, and Taffies in the $15-$20 price bucket were the fastest movers, followed by Candies in the $10-$15 bucket. We also saw this in the previous pricing landscape chart. More importantly, for both of those segments we can see that the $5-$10 price bucket has significant higher year over year growth than the more expensive price buckets. In fact, in all five segments, the $10-$15 price bucket has higher year over year growth than the $15-$20 price bucket, indicating that the 100mg edible market is still shifting towards a lower average price.

However, since there is still strong demand for edibles in the middle of the pricing landscape, an edible manufacturer might want to consider offering two brands: one priced in that consistent mid range, and one for fast-growing value end of the pricing spectrum.

Our new Insights Pricing dashboards allow you to perform extremely sophisticated analyses, but there are limits to what they can do. If you’re looking for a specific and unique pricing analysis, please contact us via the chat box below. We provide analyst services to deliver analysis and market research customized to your needs. Below is an example of such an analysis, diving more deeply into the 100mg edible pricing landscape we’ve already explored.

Proportion of 100mg edible unit volume by average item price and brand rank

In this analysis we’ve grouped brands by their rank over the previous 6 months, within the Washington 100mg edible market. The column labelled as ‘Example Brand’ can be customized to our client’s own edible brand, or their most important competitor. We are evaluating unit volume again, but now with more specific price bands. Ignoring the ‘Example Brand’ data, let’s focus first on what the top 5 brands in the category are doing in terms of prices. We can see that they have a significantly higher proportion of unit volume in the $10-$12.50 price bucket (36.4%) than the brands ranked 6th through 15th (10.6%). This might imply that they are at the top of the rankings because of their low prices, or it could also be that they can reduce their margins due to their higher volume.

Interestingly the 6th through 15th ranked brands saw most of their unit volume from the middle of the pricing landscape with 42.4% of unit sales coming from the $15-$17.50 price bucket over the previous six months. This indicates that a producer of 100mg edibles should probably not target this price range if they are looking to stand out.

This is just one example of the type of custom analyses our team offers to clients so that they can use data to steer critical decisions in all areas of their business, not just pricing. If you have a question about the cannabis industry, Headset’s Analyst Service team has the data and the expertise to help you answer it. Sign up below for our Analyst Services and get market research analysis customized for your needs.